Most Asian stocks encountered declines on Thursday, driven by lingering apprehensions about a Chinese economic slowdown. Japanese stocks, in particular, experienced a sharp fall as Bank of Japan Governor Kazuo Ueda discussed potential shifts away from negative interest rates. The Chinese markets, notably the Shanghai Shenzhen CSI 300 index, hit a nearly five-year low, reflecting persistent worries. The Shanghai Composite and Hong Kong’s Hang Seng index also slid, with Chinese trade data for November offering little relief. Moody’s recent threat of a credit rating downgrade added to the negative sentiment, citing risks from a property market downturn and a lack of clear government policy support.
Japan’s Nikkei 225 index declined 1.6% as Governor Ueda signaled challenging times ahead and discussed options regarding the bank’s ultra-loose policies. The Bank of Japan’s potential pivot from record-low interest rates contributed to the market’s unease. Broader Asian markets followed the negative cues from China, coupled with a lackluster performance on Wall Street. Investors awaited key U.S. labor market readings, anticipating insights into the Federal Reserve’s timeline for interest rate adjustments. Despite recent market jitters, expectations of a less hawkish Federal Reserve had driven gains in Asian stocks over the past month, with markets betting on policy loosening by March 2024. The trajectory of Asian markets remains uncertain as they navigate economic challenges, global cues, and upcoming events, including the Reserve Bank of India meeting.